Manufacturing in Europe Weakens and Unemployment Nears 11%

Arthi Gupta
01 Jun, 2012
New York City

The European indexes slumped after mmanufacturing dropped to a 3-year low in May but euro area jobless rate was stable in April. The IMF was forced to deny rumors that Spain requested direct assistance and UK growth forecast was lowered.

[R]1:00 PM Frankfurt – The European indexes slumped after mmanufacturing dropped to a 3-year low in May but euro area jobless rate was stable in April. The IMF was forced to deny rumors that Spain requested direct assistance and UK growth forecast was lowered.[/R]

Market indexes in Europe extended losses after the latest batch of economic data in the region offered a bleak view. The unemployment in the region rose in April and manufacturing dropped to a 3-year low in May as the political turmoil and slow moving bank run in the peripheral euro zone continued.

Ireland approved the bailout conditions for the access of next tranche of funds from the European agencies in a referendum held on Friday.

Dismal manufacturing data from China also added to the rising global economic worries.

China''s manufacturing activity eased in May, driven by a reduction in new orders, a survey by the China Federation of Logistics and Purchasing showed. The index fell more than estimated to 50.4 in May from 53.3 in April.

IMF was forced to squelch to growing list of rumors circulating at trading desks around the world and confirmed that Spain has not requested assistance and there are no plans to offer direct assistance to the struggling nation.

Gerry Rice, Director, External Relations Department, International Monetary Fund made a statement after several media reports speculated a bailout plan in works.

In Paris trading, the CAC-40 Index declined 33.62 or 1.1% to 2,983.39 and in Frankfurt the DAX Index edged lower 118.81 or 2.0% to 6,143.41.

The yield on Spain’s benchmark 10-year bonds were unchanged at 6.53%, and the yields on the 10-year Italian bonds fell 0.07 percentage point to 5.98%.

For the week, the CAC-40 Index slumped 2.2% and the DAX Index slumped 3.1%.

Euro-zone Jobless Rate Stable

The euro area seasonally-adjusted unemployment rate was 11% in April and was stable compared to March but rose from 9.9% in April month a year ago.

The EU27 unemployment rate was 10.3% in April compared with 10.2% in March and 9.5% in the month a year ago.

The number of unemployed persons increased 110,000 in the month to 17.4 million in the euro area in April.

The youth unemployment rate was 22.4% in the EU27 and 22.2% in the euro area with Spain leading the highest unemployment rate at 24.3%.

Euro-zone Manufacturing PMI Dips

The seasonally adjusted purchasing managers'' index for the euro-zone fell to 45.1 in May from 45.9 in April, marginally above the flash estimate of 45.

Manufacturing activity in Germany, France and Spain fell to their lowest levels since mid-2009.

UK Growth Forecast Cut

The British Chambers of Commerce lowered its estimate for UK GDP growth.

In its latest Quarterly Economic Forecast, the BCC lowers 2012 GDP growth forecast to 0.1% from 0.6% and for 2013 the growth forecast was revised up to 1.9% from 1.8% its previous estimate.

UK PMI Declines

The UK manufacturing sector contracted in May, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply showed today.

The seasonally adjusted purchasing managers'' index for the manufacturing sector dropped to 45.9 in May from 50.2 in April, hitting the lowest level in three years.

Gainers & Losers

adidas AG fell 2% to €58.710 after the maker of athletic footwear, apparel and equipment completed its acquisition of Adams Golf, Inc. for $10.80 per share in cash representing a transaction value of about $70 million or €53 million.

BP plc rose 2.8% to 405.75 pence after the UK based oil company said it intends to sell its shareholding in Russian joint venture TNK-BP Ltd. The company notified joint venture partner Alfa Access Renova of its intention to sell its stake after it received unsolicited offer.

Koninklijke KPN N.V. dipped 0.5% to $9.54 after the Dutch landline and mobile telecommunications company’s boards recommended shareholders to take no action regarding América Móvil’s unsolicited partial offer.

BT Group plc climbed 0.3% to 206.90 pence after the communications services company announced the sale by BT Global Services of its French application development services business to the French IT services company Osiatis.